Client tells me they have an opportunity to take over the business their one parent currently owns which is 2 a partner partnership according to the latest tax return filing. The two partners (both living) are related but not thru marriage. Client, child of one of the partners, wants to know which route is best; having business given to them OR buying the business. My initial thought is either way the IRS would want to see the business valued at fair market value if its a sale or a gift. Your thoughts please.
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If the partnership has only 2 partners and one of the partners is the parent of the person interested in taking over the business it is possible for the parent to gift his/her share to the child. The other unrelated partner could be bought out.
Without know what their total estate is it may or may not trigger any gift taxes.
If the business valuation is not know, it will have to be ascertained to make it an arms length transaction.
Couple of years back, I had a client who owned a restaurant with his brother. They each gifted their share to their respective children and the children (cousins) are now running the business. Estate was not big enough to trigger any gift taxes, though a return was filed.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR -
Yes both older owners were alive and one of them was actually managing the wait staff as a W2 employee.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDRComment
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If I remember correctly, they were renting the store in a strip mall. They owned all the kitchen equipment and furniture etc.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDRComment
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